Warren Buffett will testify today before the Financial Crisis Inquiry Commission (FCIC), the bipartisan committee that has been set up to investigate the causes of the financial crisis. The FCIC has been compared to the Pecora Commission which investigated the causes of the Great Depression in the 1930s. With the commission’s final report due on December 15, 2010, any recommendations will be made after the Congressional elections and well after the financial regulatory reform legislation passes Congress which makes one question whether the intent is to influence public policy or simply to serve political interests.
Carol Loomis recently reported that Mr. Buffett refused to testify voluntarily and is only appearing after receiving a subpoena from the FCIC. According to Ms. Loomis, Mr. Buffett has been following the FCIC proceedings and has noted that most of the witnesses are individuals implicated in the crisis. He came to the conclusion that his testimony would not be useful and refused the voluntary invitation. Mr. Buffett is being called to testify regarding Berkshire Hathaway’s investment in Moody’s as well as the role of credit rating agencies in general, but it is reasonable to expect that broader questions regarding the crisis will be asked.
One interesting aspect of the hearings today involves Mr. Buffett’s rare political endorsement of a Republican politician. When Arnold Schwarzenegger ran for Governor of California in 2003, Mr. Buffett enthusiastically supported his candidacy. It was a major departure from Mr. Buffett’s pattern of endorsing Democratic Party candidates. Gov. Schwarzenegger ran for re-election in 2006 and easily defeated his Democratic Party opponent Phil Angelides.
The Chairman of the FCIC is … none other than Phil Angelides. While there is no evidence to suggest that Mr. Angelides holds any grudges regarding his defeat in the 2006 election, it will be interesting to watch the proceedings to see if any bias is detected. The FCIC will no doubt provide members with great footage blasting “Wall Street” interests and may play well in future campaign advertisements. Mr. Angelides is known to have political ambitions and may run for the Senate in 2012 or for California Governor in 2014 if a Republican wins the governor’s office this year.
Disclosure: The author owns shares of Berkshire Hathaway.